On September 17, the Federal Deposit Insurance Corporation (FDIC) announced a notice of proposed rulemaking (Proposal) aimed at enhancing recordkeeping for bank deposits received from fintech and other third-party, non-bank companies. The FDIC is accepting public comments on the Proposal for 60 days after publication in the Federal Register.
Troutman Pepper Partner Matthew Bornfreund spoke at the ABA Business Law Section Fall Meeting in San Diego on September 12, 2024. The discussion focused on the FDIC’s brokered deposits NPR.
This is the first of three articles focused on a key question: as bank-fintech partnerships continue to play a vital role in driving financial services, how does the industry make this system safer and better?
Fintechs and their partner banks are on edge. Regulators are concerned. But as counselors to a wide range of banks and nonbanks, we are confident that the bank-fintech partnership model is not broken. We have seen these partnerships work well — not just for clients, but for consumers and other end-users — with rigorous, risk-based controls that satisfy both the regulators and the public.
Matthew Bornfreund, a partner in Troutman Pepper’s Corporate Practice Group, was quoted in the August 21, 2024 S&P Global Market Intelligence article, “FDIC’s Brokered Deposit Proposal Expected to Face Industry Pushback.”
Currently, deposit accounts enabling payment transactions are automatically non-brokered, but the new rule will eliminate this designation, meaning parties relying on the
Matthew Bornfreund, a partner in Troutman Pepper’s Corporate Practice Group, was quoted in the August 7, 2024 American Banker article, “Bank Allies Say FDIC Brokered Deposit Plan Reflects Outdated Thinking.”
Matthew Bornfreund of Troutman Pepper says such “hot money” – as it was later dubbed – was viewed by skeptics as one of
Troutman Pepper Partners Alexandra Barrage and Matthew Bornfreund were quoted in the August 5, 2024 S&P Global article, “FDIC Proposal Would Classify More BaaS Deposits as Brokered, Not Core.”
On July 30, 2024, the FDIC proposed substantive changes to the 2020 Brokered Deposit Rule (2020 Rule) that, if finalized, could meaningfully impact a wide group of bank and nonbank stakeholders who rely on the current rule’s definition of “deposit broker,” related exceptions, and Q&As. Many of the proposed changes effectively reverse the 2020 Rule.
Yesterday, the Board of Governors of the Federal Reserve System, the Federal Deposit Insurance Corporation, and the Office of the Comptroller of the Currency (collectively, the agencies) issued a joint statement highlighting potential risks associated with banks’ arrangements with third parties to deliver bank deposit products and services. While the information is not new, it clearly memorializes the issues that have been at the forefront of recent enforcement actions involving banks operating under a Banking-as-a-Service (BaaS) model.
A bank’s positive, cooperative relationship with its banking regulators is particularly important when seeking regulatory approval for significant transactions, including mergers. An effective communications strategy that promotes an open, consistent and prompt flow of information, specific regulatory issues and areas of risk under review is key to maintaining a good relationship before, during and after the application review process.
On June 24, the Office of the Comptroller of the Currency (OCC) announced it is requesting comments on proposed amendments to its recovery planning guidelines. A recovery plan’s purpose is to provide a covered bank with a framework to effectively and efficiently address the financial effects of severe stress events and avoid failure or resolution. Among other things, the proposed amendments aim to expand the guidelines to apply to banks with average total consolidated assets between $100 billion and $250 billion. The proposal also seeks to incorporate a testing standard and clarify the role of non-financial risks in recovery planning.